Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features COMPUTERSHARE LIMITED, and other companies. For more info SHARE ANALYSIS: CPU

By Chris Shaw

As reporting season gets underway brokers have continued to fine tune their models, with ratings downgrades still the dominant change. Among brokers in the FNArena database there were 16 downgrades over the past week compared to just four upgrades, leaving total Buy ratings standing at 54.8%.

Among the upgrades was Computershare ((CPU)), Deutsche Bank lifting its rating to Buy from Hold given the view the tide is starting to turn for the stock. According to Deutsche, cyclical revenues appear to be bottoming out, while acquisitions and or capital management also offer some potential upside.

Retail stocks continue to find the going tough but this hasn't stopped Deutsche upgrading Harvey Norman ((HVN)) to Buy from Hold. Expectations for the stock should be tempered somewhat though as the move follows a change in analyst, who is more positive on the potential for the group's property portfolio to underpin value.

RBS Australia upgraded Nexus Energy ((NXS)) to Buy from Hold on the back of the company's announcement the Crux assets would be developed into an integrated gas and liquids project. As RBS notes, the deal clears up funding issues for Nexus, while also offering greater clarity with respect to long-term growth plans.

Stockland ((SGP)) was also upgraded but only to Neutral from Underperform, this following a review of its model by Credit Suisse. Changes to assumptions meant an increase in price target, enough for the broker to lift its rating in line with its total return system.

On the downgrade side of the ledger, Alumina Ltd ((AWC)) was lowered to Sell from Neutral by BA Merrill Lynch, the broker arguing lower global production is a negative for alumina prices and so Alumina's earnings.

BA-ML also downgraded Ansell ((ANN)) to Neutral from Buy, as while interim earnings were broadly as expected the broker sees few shorter-term catalysts to drive share price outperformance. BA-ML wasn't alone in downgrading Ansell, as JP Morgan made a similar move to reflect ongoing Australian dollar headwinds and the postponement of a share buyback, which must have disappointed the stockbroker.

JP Morgan also downgraded Ardent Leisure ((AAD)) to Neutral from Buy to reflect lower theme park numbers stemming from wet weather in Queensland, while Bunnings Warehouse Property ((BWP)) copped downgrades to Neutral ratings from both JP Morgan and BA-ML as while both see the yield as attractive, there is limited value in the stock relative to the sector.

Also in the property sector, Centro Retail ((CRF)) was downgraded by UBS to Neutral from Buy, largely on valuation grounds given a recent run-up in the share price. Valuation was also the reason for RBS Australia downgrading Cochlear ((COH)) to a Hold from Buy previously.

It was a similar story for Telstra as Citi moved to a Neutral rating from a Buy recommendation, while recent share price appreciation has been enough for RBS to downgrade both Webjet ((WEB)) and Toll Holdings ((TOL)) to Hold from previous Buys. For Webjet the downgrade came despite a solid interim result that saw forecasts and targets lifted across the market.

Tough conditions in the IT market have caused Data#3 ((DTL)) and Reckon ((RKN)) to find the going more difficult of late and both have paid the price, RBS downgrading the former to Hold from Buy and Macquarie making a similar change on the latter.

The finance sector is not finding things much easier as evidenced by a profit warning from Macquarie Group ((MQG)) and a disappointing quarterly report from National Australia Bank ((NAB)). This prompted downgrades in both cases, Citi moving to a Neutral rating on Macquarie and Deutsche doing the same with NAB.

Among the resource plays, Mount Gibson ((MGX)) was cut by JP Morgan to Neutral from Overweight The change followed what the broker viewed as shocker of a result, with realised prices lower and costs higher than expected. As well, board room issues remain, which is adding to the uncertainty surrounding the stock.

With respect to changes to earnings estimates, Cochlear was among the more significant of the increases thanks to an interim result that suggested little market share loss stemming from its product recall. On the cuts to forecasts side Sims Group ((SGM)) saw estimates lowered on the back of revised earnings guidance, while forecasts for Gunns ((GNS)) were also cut as brokers adjust their models for a proposed capital raising.

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

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